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Maximizing profit

  1. Oct 1, 2012 #1
    An investment broker wants to invest up to $ 33000 She can invest in two mutual funds based on their yearly average return for the 5 years ending December 31, 2009: the Franklin Natural Resources fund yielding 8% and the Oppenheimer Developing Markets A fund yielding 10% She wants to invest at least $8000 in the Franklin Natural Resources fund and no more than 13000 in the Oppenheimer Developing Markets A fund. How much should she invest in each type of fund to maximize her return?

    I got the two maximizing points 20,000 and 13,000

    and got $2900 for max return, and it said it was wrong, why was it wrong?
  2. jcsd
  3. Oct 1, 2012 #2

    Ray Vickson

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    It is not wrong.

    However, your description of your solution is a bit wrong: you do not have two maximizing points, you just have the single point (F,O) = (20,13) (in $000s).

  4. Oct 1, 2012 #3
    ok thanks, I put that in online and it said my Max return was wrong, is it because it said 5 years?
    even if it was 5 years, I multiplied the max return by 5 and it was still wrong?

    is it just me or something is wrong with the system?
  5. Oct 2, 2012 #4

    Ray Vickson

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    The LP formulation is: let F = $000s invested in Franklin and O = $000s invested in Oppehheimer. then: the annual yield, in $000s is 80*F + 100*O, so:
    max Z = 80*F + 100*O
    F >= 8
    O <= 13
    O+F <= 33
    O,F >= 0.

    The optimal solution is F = 20, O = 13, giving Z = 2900. Then the only issue is whether or not to multiply the 2900 by 5. If some system is not accepting this solution that system is wrong or has bugs.

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